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Comments

When calculating the NPV we ignore the initial investment? Cause I’m seeing 307,162
But I assumed we working a regular NPV and I subtracted the 240000 and ended up with 10 years duration which I thought to be long …..

Dear John,
Completely lost in this one. When I compare this to ACCA September/December 2016 Sample Answers, the question about Fernhurst, they calculate the project duration ar half of the value in 2.78 years by dividing the NPV of the project with multiplied proportions of the returns, eg (1×0.165)+(2×0.227)+(3×0.275)+(4×0.333) that gives the answer of 2.78 years. If I solve it using the technique in presentation I get 8.84 years, which seem unrealistic. Also there is no answer for Ex7 in course notes, and the course notes (pg. 53) state that the project duration “is a measure of the average time over which a project delivers it’s value”, other sources tell this is a measure of the time the project delivers half it’s value?

Which method is the correct one? Am I using the project duration where necessary or I should be using another technique?